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DEL.ICIO.USNot every good project merits a TAD
The Atlanta Journal-Constitution
Michael Sullivan invokes what he calls the “but-for” test in weighing whether a special tax allocation district should be used to pay for a redevelopment project.
The Lawrenceville attorney says tax allocation districts (TADs) should be used to finance a project if - and only if - the project or development is too prohibitively expensive for the free market to get it off the ground.
“You use TAD funds where the project wouldn’t happen without that element,” Sullivan told me. “You don’t use them to make the project much more profitable. You use them when a project or development wouldn’t happen except for TAD funding.”
Sullivan knows a thing or two about TADs. He’s the attorney for the developers who have proposed the $2 billion redevelopment of the OFS Brightwave fiber optics plant at Jimmy Carter Boulevard and I-85. That project is now on hold as a result of the Georgia Supreme Court’s unanimous ruling Feb. 11.
The high court said a projected $850 million in school taxes can’t be used to build parks, transit and affordable housing on Atlanta’s proposed Beltline.
The decision riled many a developer. It put in limbo projects that had planned to use TADs as a funding mechanism, including the OFS proposal.
The high court got it right. Constitutionally, school taxes shouldn’t be used to pay for redevelopment projects.
J. Alvin Wilbanks, the superintendent of Gwinnett County Public Schools, said he thought the merit of TADs should be weighed on an individual basis.
“From the school system’s perspective, development can increase the growth digest, which could have a positive impact on the community and its schools,” he said in an e-mail.
Think whatever you’d like about the funding mechanism. The OFS site seems to be a prime candidate for it.
It’s one of the first industrial sites in Gwinnett. Costly sewer and infrastructure upgrades pose conditions that would make an overhaul of the site expensive for any developer, and that’s what TADs were initially created for: to help local governments upgrade blighted areas whose renewal carries sticker shock.
Some projects, though, make you wonder why a TAD is even necessary. Case in point: the Suwanee Gateway.
City leaders in the town want the area surrounding Exit 111 off 1-85 to be a showcase for residents and visitors. Before the high court ruling, they had plans to create a tax allocation district to help fund $35 million revitalization efforts in the area: think streetscapes, new offices and shops, according to the city Web site.
But would a TAD for this part of Suwanee pass attorney Sullivan’s “but-for” test - the one in which he questions whether a project could sustain itself without use of a TAD? Opus South Corp. has already begun building a mixed-use village on a 148-acre site east of I-85. Terraces at Suwanee Gateway is to include a mix or retail shops, restaurants, office space, a hotel and residential units. It should jump-start other projects.
Seems to me that in Suwanee - ranked by Money magazine as the 10th best small community to live in - the free market is alive and kicking along this corridor.
No need for a TAD.
Rick Badie’s column appears on Sundays, Tuesdays and Thursdays. Contact him at 770-263-3875 or e-mail: rbadie@ajc.com.
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Comments
By Michael H. Smith
February 26, 2008 9:01 AM | Link to this
Diverting school money to pay for development is absurd. The court certainly did get it right - NO ANDS’, IFS’, “BUT FORS” OR OFS PERIOD!!!
This is clearly a case of politicians and would-be politicos in bed with the greedy developers.
By Mara
February 26, 2008 9:27 AM | Link to this
School money should go to schools. If the government wants to fund something else, we should vote on that seperately.
By Richard
February 26, 2008 9:46 AM | Link to this
TADs are not funded through taking money from existing school taxes. TADs are funded through bonding against the long-term projected tax revenue increase of the new project. Get your facts straight!
By John Moxie
February 26, 2008 9:52 AM | Link to this
Better areas = higher taxes. Higher taxes = better schools for a long time to come. You see, that’s how the economy works. You invest up front in the short term and get a return in the long run. It seems that Americans in general don’t really get that concept anymore.
By steve-o
February 26, 2008 9:54 AM | Link to this
First of all, there is a list of several tests, as prescribed by the GA Legislature, to see if a TAD is warranted.
Second of all, schools still collect money on TAD projects, but only on teh value at the time of the implementation of the TAD over the next 20-30 years. After the bonds have been paid back, the increment or appreciation is taxed as well. So no, the schools don’t lose out on money. In fact, it represents an investment by schools so that the tax digest increases at a faster rate over a longer period of time.
Also, just because an area;s economy is booming doesn’t mean that a TAD isn’t needed. For example, the economy was ripe for Atlantic Station. However, the project wouldn’t have been possible without TAD funding due to the excessive costs of environmental cleanup and infrastructure placement.
By Michael H. Smith
February 26, 2008 11:09 AM | Link to this
The court got the facts straight and my statement stands!
By Mark
February 26, 2008 11:31 AM | Link to this
Why waste money on the schools? People educated in GA are among the most illiterate in the country. Look where GA ranks in education. LOL!!
By BobG
February 27, 2008 8:25 AM | Link to this
A TAD has the same effect on the Net Tax Digest (NTD) as does an assessment “freeze”— for a time, it removes taxable value from the NTD and introduces inequity into the property tax process. This can contribute to higher property taxes for all.
By Pompano
February 27, 2008 4:41 PM | Link to this
Sorry J Moxie, the investment concept you state seems to work everywhere EXCEPT the Public school system. Especially in Georgia, higher taxes do not equal better schools.
Gov’t backed development projects in this state are usually implemented to line the pockets of a few well connected developers and not for the good of the general population.